Hospitals managing without price hike despite cost pressure, says industry

Claims revenue from regular operations impacted by Covid-19, is down 60-80%

Private hospitals have claimed that despite costs going through the roof and revenue from regular operations being impacted by Covid-19, they are not passing the entire burden to patients. Industry representatives have said this may impact financials since normal treatment is down by 60-80 per cent.

Costs have increased due to extra sterilisation, infection control, setting up of isolation wards, staff rotation and quarantine, responsible waste disposal and comprehensive disinfection. The treatment of Covid-19 patients requires upgradation of infrastructure and protocols to ensure safety.

For instance, daily consumption of Personal Protective Equipment (PPE) in an isolation ward can go up to 40 in one area in one day. For the same number of patients, more manpower is needed considering a team of healthcare professionals may have to be off for 14 days after working a week.

"Most hospitals are actually subsidising it and unable to cover indirect cost," says apex industry body Healthcare Federation of India (Nathealth).

Most government hospitals are also incurring huge expenses, but they can mobilise resources from other areas. However private hospitals don’t have that avenue and have been left to fend for themselves in tackling crisis at the frontline, managing huge fear and apprehension of every employee, significantly increased expenses and dwindling revenue since all Operation Theatres and elective work have been suspended. “There is no way hospitals will be able to sustain in this scenario in the longer run,” says Nathealth.

In some cases, the cost increase has nearly been 30-40 per cent, most of which costs have been absorbed by providers.

"So far, we have not given any thoughts to price change and our priority is to tackle the pandemic and make the hospital environment conducive for patients and ensuring the safety of our patients and healthcare workers," said Ashutosh Raghuvanshi, CEO and MD, Fortis Healthcare.

In many hospitals, regular charges for chemotherapy and dialysis and OPD has not been changed, though the hospitals are incurring costs in ensuring safety of patients and staff. Cost of PPE being used for elective surgeries are passed on at discounted rate.

Dilip Jose, managing director and CEO, Manipal Hospitals added that most hospitals in April reported only about 30-40 per cent of the normal revenue. Since the cost structure of hospitals is mostly fixed, this has led to significant cash losses in the month. Many have managed by cutting expenses to only bare essentials, deferring payments, additional borrowings and even slashing payments to doctors and employees.

"Most hospitals are absorbing much of the additional costs at the moment so as to shield Covid patients from further expenses. Rather than cost increases on account of Covid, bulk of the impact on the sustainability of hospitals is on account of the very large drop in revenue as patient visits dropped to a trickle due to lockdown restrictions," said Jose. Regarding a price increase, it would take a view once the lockdown is over and then assess how quickly the operations could scale back to pre-covid levels. The situation that the sector witnessed in April is not at all sustainable even for a few months.

S Gurushankar, president, Association of Healthcare Providers (India), Tamil Nadu and chairman Meenakshi Mission Hospital and Research Centre in Tamil Nadu, said that the industry had trouble in recovering its payment and both central and state governments have pending payment to the industry. Outstanding payment has gone up, which also has an impact on its cash flow. The industry still have to make payments for the bank loans, equipment maintenance charges, manpower salary etc, which is challenging them. After the two-month lockdown the outpatient inflow has grown from 40 per cent to 50 per cent, but those surgeries which were elective, has become emergency.

"Overall if you consider the cost increase for the hospital it is around 40-50 per cent. But because our patients can’t afford that, we have taken those losses and hoping things will change soon," he said. The direct costs passed on to the customers is 10 per cent of the expense that is borne directly by the patient. The price hike can only be marginal now.